Samsung plans $7bn stock buyback

• Published On: 16 November 2024 at 13:15

Samsung Electronics has announced plans to buy back 10 trillion won ($7.2 billion) in shares over the next year, making it one of the company's largest shareholder return initiatives in history.

The buyout will take place in stages, with the first phase involving the purchase of around 3 trillion won worth of shares between now and February 2025.

These shares will be cancelled. According to Bloomberg, the company's board would then decide how to best repurchase the remaining 7 trillion won in stock.

Samsung's stock repurchase announcement comes amid mounting concerns about the company's memory chip division, which is under increasing competition from its smaller rival, SK Hynix.

SK Hynix has become Nvidia's primary supplier of high-bandwidth memory chips, which are used in the company's popular AI accelerators.

This has generated concerns that Samsung, formerly a dominating player in the global memory semiconductor business, may be missing out on the fast expanding AI industry.

Furthermore, investors are evaluating Samsung's exposure to geopolitical risks, specifically the potential impact of Donald Trump's protectionist trade policies, given the company's ties to China.

While Samsung's shares rose as high as 8.6% on Friday on the repurchase announcement, they are still down 32% this year.

The business, which also manufactures the world's largest smartphones, is dealing with a broader drop in global consumer electronics sales.

"A lower valuation is justified given trade risks around Korea and also the catch-up in HBM, which will take time, and a weak memory environment," said Sat Duhra, a fund manager at Janus Henderson Group, referring to high bandwidth memory. "There are better tech stocks to own here — most of them are in Taiwan."

on October, Samsung stated that it has made progress on certifying and supplying Nvidia with next-generation AI memory chips.

During an earnings call, Jaejune Kim, executive vice president of Samsung's memory business, stated that the company now expects its most advanced HBM3E memory chips to be available in the fourth quarter.

This is a big achievement for Samsung as it strives to reclaim territory in the high-performance memory industry, particularly in the booming AI sector.